Hey guys, as promised yesterday in my How to Buy Kyber Network (KNC) Tokens? Everything You Need to Know Explained Simply piece, today I’m posting a very comprehensive guide on how to trade Bitcoin Futures on MXC.co.
For those of you who missed it, I also created a very easy-to-follow guide on How to Trade with Margin on MXC.co Cryptocurrency Exchange but this one’s a little different.
Here, we will talk about perpetual futures contracts - the ones that MXC and pretty much all the popular cryptocurrency exchanges use predominantly for highly leveraged trading.
Before we dive into everything there is to know, I’d like to inform you that using high leverage is very risky. While it can increase your profits, it can also delete your capital very quickly. Leveraged trading carries a serious risk of capital loss and you should NEVER trade with money that you can’t afford to lose.
For those of you who’re curious about my experience, I did an article that went viral here on Publish0x a few months ago:
What Are Perpetual Bitcoin Futures Contracts?
This is obviously the first thing you’d need to know. The main difference between futures trading and spot trading is that the former is a derivative product.
In Layman’s terms, a futures contract represents an agreement between two parties where one agrees to buy an asset from the second at a certain point in the future at a predetermined price.
Example: You have an apple that you want to sell. I want to buy it in 3 days and we agree for me to pay you $1 for it.
This is the most traditional futures contract and it has a fixed expiration date - I will buy the apple from you in 3 days for a price of $1.
The same is true for traditional futures contracts for Bitcoin at institutional venues such as the Chicago Mercantile Exchange where the contracts expire at a certain date. There are exchanges such as Binance and BitMEX that also offer similar contracts but for retail investors.
Now, what’s the difference with perpetual Bitcoin futures?
To be as simple as I can - perpetual contracts don’t have an expiration date. This means that you can open a position and close it whenever you want - in a month, or in a second.
The thing that makes these contracts interesting is that you can trade them with a very high leverage. MXC.co supports up to 100x on its Bitcoin futures contracts and high leverage on other cryptocurrencies such as ETH, EOS, BCH, LTC, XRP, and so forth.
So, using a leverage factor of 100x, you can open a position worth $10,000 by posting a margin of as little as $100. ($100 x 100 = 10,000).
What’s The Risk?
Cryptocurrency exchanges won’t ever put themselves in a position for their users to own them money. This is why there’s this “liquidation price” factor that you have to consider.
Imagine you open a position of $10,000 using only $100 of your own money and leverage of 100x.
In this scenario, if Bitcoin’s price loses $100 of its value, your position will be liquidated. In other words, it would take a tick as small as 1% in the wrong direction for you to lose your money. Of course, if Bitcoin hits $11,000, you would have made $1,000 instead of $10 (because you’re trading with $10,000 and not with $100).
So, obviously, you have to be very very careful and it’s not recommended that you use a leverage of more than 20x (though that’s pretty high as well).
Something that I’ve found to be very helpful for my portfolio is sticking to the 2% per trade risk. In other words - I never risk more than 2% of my portfolio on a single trade. If the setup is very risky, I’d even reduce it to 1%.
Trading Bitcoin Futures on MXC.co: Everything You Need to Know
At the top navigation menu, you will find the Futures section. As soon as you open it, you will land on the following trading interface:
As you can see, on the left side there are all the different types of futures contracts that you can trade. Currently, the exchange supports BTC, ETH, EOS, BCH, LTC, ETC, XRP, BSV, LINK, ATOM, ONT, ZEC, DASH, XTZ, and QTUM. The leverage on all of these contracts is different but it should be more than enough.
In the middle, we have a standard chart provided by TradingView and on the right there are the order books and the orders.
The first thing you’ll need to do is to transfer some funds to your futures account from your main account. If you’ll notice in the bottom right corner, you will find the “Transfer button.” Click it and decide exactly how much you want to fund your account with.
When you fund your futures account, it’s time to trade.
Different Orders on MXC.co
There are four types of orders that you can use on this exchange and they are pretty much everything you need.
The first thing to note - you can adjust your leverage by clicking the “Cross” button. From the window that pops, select “Fixed” and adjust the leverage to what you find suitable.
You should use a limit order when you want to open a position at a price different than the current market price.
So, imagine Bitcoin trading at $9,200, but you know there’s strong support at $9,100 and you want to buy the retest. You place a limit order and input $9,100 as a price and the selected quantity. You can use the below slider to adjust the position relative to your entire stack.
These are the easiest orders to work with. They are executed immediately at the current market price.
All you have to do is input the quantity that you want to buy or use the slider to adjust it relative to your entire stack.
These can be used as a take-profit (TP) or stop-loss (SL) mechanism.
The trigger price is the “stop” price - when your limit order will enter the order book. The “price” field is the execution price of your limit order and below that is the quantity.
So, if you’ve opened a position at $9,000 and you want to take your profits at $9,200, you can set a Stop-Limit order with a trigger price of, let’s say $9,180 and a limit price of $9,200. This way, once the trigger price is hit, you will have a limit order to be executed at $9,200.
The principle is the same as for the Stop-Limit orders with a slight difference.
All you need to do is input your trigger target price and once it’s hit, the system will market sell or buy the quantity you input.
That’s everything there is to know about setting up the orders. Now, let’s see how to open and close an actual position.
How to Open and Close a Bitcoin Position
We will use a simple market order for this exercise.
For this, I’ve set up my leverage to 10x and I’m buying 25% of my USDT in the futures account (it’s roughly around $36).
As you can see, the system allows me to buy 97 contracts ($1 each) for $9.02 at the current market price. However, my position will be 0.0097 ($97) instead of $9, because of my 10x leverage.
Once you’ve opened your position, it will appear on the left side right below the trading chart. That’s how it looks like:
Here’s also where you track the performance of your position and metrics such as the overall size, position margin, average price, liquidation price (see above explanation), floating PNL, and so forth.
Now, if you want to close your position, you can do so with a stop-limit/market order or you can close it immediately by inputting the position size you want to close and click “Close Long”. The cool thing is that there’s an automated drop-down which breaks down the position in percentages, so you can easily close a certain amount of your position and keep the rest for future action.
Well, guys, that’s pretty much it. I know it was a long read but I really hope it made things easier to understand.
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Disclaimer: None of the above content is financial advice. The information hereby provided is for educational purposes only. Do your own research before investing in cryptocurrency. Trading cryptocurrency, especially with leverage, comes with a serious risk of capital loss. Be careful! Never trade with money that you can’t afford to lose!